You are Wrong

Top 5 misconceptions about the oil & gas market, plus a free download of “Introduction to the Oil and Gas Industry” for our viewers. Click here to download: Introduction to Oil & Gas.

Transcript of Session –

Hey, folks. Let’s learn some more about the oil and gas industry.

[Music]

Okay. I was going through the process of gathering my e-mails and putting them together for the next show where we answer e-mails and I figure out that I can do a show just on stuff that people get wrong about the oil and gas industry. So that’s what today’s show is, You Are Wrong. Let’s get started.

Number one. A big oil controls gasoline prices.

No, they don’t. So, when any of the oil companies get oil out of the ground anywhere in the world, it gets sold in the global market. It’s not sold to their refineries to turn into gasoline and sell in their gas stations. So, if you think about that process, the refineries are then buying this crude on the global market and whatever best price they can get and then refining it adding their operating cost and then the taxes are added here in the US and that’s what controls gasoline prices.

As a matter of fact, Exxon owns – no company own retail stations what they called course in the US, they got out of that because they realize that’s the least profitable part of their business. So no, you’re wrong, big oil does not control gasoline prices.

Number two. The oil and gas industry gets government subsidies even though they are making lots of money.

Wrong. They get no subsidies. They do get tax breaks, but they get the exact same tax breaks that Ford, GM, Microsoft, and Apple get and it has to do with research and development cost that they get to write off. But they also get to write off depreciate their equipment in the same ways that the automobile companies get to do. So there is no government subsidies for oil and gas. It’s bullshit.

Number three. The oil and gas companies don’t pay their fair share of taxes.

Once again, wrong. The oil and gas industry actually pays more taxes than almost anybody else. So if you look at the average of the S&P 500. The average is 26.5% that companies like Yahoo and Apple and GM pay in taxes, but oil and gas industry pays 41.1%, so they actually pay more. So every single day the oil and gas industry pays about $85 million in the US in taxes. That’s more than any other vertical. So once again, wrong.

Number four. Big oil companies are making excessive profits by taking advantage of the public.

Okay. Once again, bullshit. That’s wrong. They’re not taking advantage of the public, they’re working in a global market. As a matter of fact, if one oil and gas company charges a penny more than the other one, its competition ceases up on that tries to take their market share. So if you think about it from a global competition point of view there’s no way this can be true and let me give you some good numbers.

So Apple’s profit margin which is 24% is very healthy, McDonald’s profit margin is about 20%. Oil and gas companies make about 10% profit, so oil and gas companies make less than half the profit margin of what Apple makes. And you don’t see anybody picking on Apple or least not the way they pick on Exxon.

All right. Number five. The oil and gas industry is environmentally irresponsible.

Once again, just wrong. So, there had been some accidents and some bad decisions made in the past like any other vertical like the grocery vertical or automotive or financial. Up between 2000 and 2010, the US oil and gas industry invested $71 billion not million, but billion dollars in technologies to reduce greenhouse gases, that’s more than twice as much as the US government spend, they spend $43 billion. So think about that, the oil and gas industry by itself spent more than twice as much as what the US government spent to reduce greenhouse emissions, so they are not environmentally irresponsible.

All right. And then finally, because we get so many questions where people just don’t understand the industry, we want to help you, once you understand how this industry really works, we’re going to offer a free download of the introduction to oil and gas industry. It’s on our website, so if you’re watching this on YouTube, just hit over to ModalPoint.com and you’ll see a link to download that.